Sir Ernest Oppenheimer (1880 to 1957) was the principal architect of the cartel structure that governed the rough diamond trade for most of the twentieth century. His career took him from a clerk's job in a London diamond office to the chairmanship of both Anglo American Corporation and De Beers Consolidated Mines, and the structures he built shaped the supply, the pricing, and the public meaning of diamond from the 1920s to the early 2000s.

Early career

Oppenheimer was born in Friedberg, Hesse, the son of a cigar merchant. He moved to London at sixteen to work for the diamond brokers Anton Dunkelsbuhler and Co., who in 1902 sent him to Kimberley as their representative in the rough diamond market. Kimberley was the centre of the diamond trade in southern Africa and the headquarters of De Beers. Oppenheimer learned the rough trade from the producer side, served briefly as mayor of Kimberley during the First World War, and used his trading position to build relationships with the South African mining industry beyond diamond.

Founding of Anglo American

In 1917 Oppenheimer founded Anglo American Corporation of South Africa, with funding from American banking interests including J. P. Morgan and from the South African mining house De Beers. The original purpose of the company was to consolidate gold mining holdings on the Far East Rand of the Witwatersrand. Anglo American grew rapidly through the 1920s and remained, until its restructuring in the early 2000s, the largest single industrial group in southern Africa.

Oppenheimer's strategic insight was that diamond, although a different product from gold, faced a similar problem of price stability. Diamond is a commodity whose price is governed almost entirely by demand-side perception, since the geological supply far exceeds what the market can absorb at premium prices. Without supply discipline, the price of rough collapses. Oppenheimer applied the lessons of the Witwatersrand mining houses to diamond.

Acquisition of De Beers

The discovery of new diamond deposits in South West Africa (now Namibia) and in the Belgian Congo in the 1910s and 1920s threatened the price discipline that the original De Beers cartel had enforced under Cecil Rhodes. Oppenheimer's Anglo American acquired control of the Consolidated Diamond Mines of South West Africa in 1919 and 1920, giving him a position outside the De Beers structure. He then used that position to negotiate a takeover of De Beers itself, becoming chairman in 1929.

The mechanism Oppenheimer designed, and which his son Harry Oppenheimer extended after 1957, was the Central Selling Organisation (later renamed the Diamond Trading Company). Producers around the world, whether owned by De Beers or not, contracted to sell their rough through the CSO, which then distributed the rough to a closed list of approximately 250 sightholders at fixed prices in mixed parcels. The CSO acted as a buyer of last resort to absorb supply during downturns, holding stockpiles in London. The system maintained price stability through the 1930s depression, the Second World War, and the post-war boom.

The marketing innovation

Supply-side discipline alone would not have produced the modern diamond market. Oppenheimer recognised, by the late 1930s, that the market for diamond required parallel demand-side investment. In 1938 he commissioned the New York advertising agency N. W. Ayer to create a campaign promoting diamond engagement rings in the United States, and the campaign and its successors ran continuously for more than sixty years. The slogan A Diamond Is Forever, written by N. W. Ayer copywriter Frances Gerety in 1947, became one of the most successful in the history of advertising.

The De Beers marketing programme established several conventions that the trade still operates within. The two-month-salary engagement ring benchmark; the diamond as the appropriate stone for engagement; the convention of the diamond eternity band; and the cultivation of new markets, particularly Japan from the 1960s and China from the 1990s, are all products of this programme. The Japanese campaign is the textbook case: in 1967 fewer than five per cent of Japanese brides received a diamond engagement ring; by 1981 the figure was approximately sixty per cent.

Political and ethical context

Oppenheimer's career is not separable from the political context of southern Africa in the first half of the twentieth century. The labour systems on which the diamond and gold mines depended were structured around migrant labour from the rural areas of South Africa and the surrounding territories. Oppenheimer was not the architect of these systems, which predated his career, but he benefited from them and operated within them. His personal political position was relatively liberal by the standards of his peer group; he was a member of parliament for Kimberley from 1924 to 1938 and supported gradual reform. His son Harry Oppenheimer was a more public critic of apartheid.

Legacy in the trade

Oppenheimer died in 1957 and was succeeded as chairman of De Beers by his son Harry. The single-channel marketing system he built remained the dominant model in the rough diamond trade until the late 1990s, when the breakdown of the Russian supply agreement and the entry of Australian and Canadian production outside the CSO weakened the cartel. De Beers formally abandoned the role of buyer of last resort in 2000 and shifted to a Supplier of Choice model. The Oppenheimer family sold the last of its De Beers shares to Anglo American in 2011 for 5.1 billion dollars, ending more than eighty years of family control.

For the contemporary trade, Oppenheimer's significance is structural. The conventions of the modern diamond market — the engagement ring as default, the sightholder system, the role of central marketing in supporting the price of a commodity that is in geological terms not scarce — are his creation. Whether the market continues to operate within this inheritance, or whether the entry of lab-grown diamond and the dispersal of rough sourcing have unwound it for good, is one of the open questions of the present trade.